Koch World 2014

By Kenneth P. Vogel, Politico

25 January 14

f the Koch brothers' political operation seemed ambitious in 2010 or 2012, wait for what's in store for 2014 and beyond.

The billionaire industrialists Charles and David Koch are convening some of the country's richest Republican donors on Sunday at a resort near Palm Springs, Calif., to raise millions of dollars for efforts to shape the political landscape for years to come.

It's the cash that can possibly kick Democrats out of the Senate majority this fall and shape the philosophy and agenda of the GOP conference - not to mention the 2016 presidential field.

The Koch political operation has become among the most dominant forces in American politics, rivaling even the official Republican Party in its ability to shape policy debates and elections. But it's mostly taken a piecemeal approach, sticking to its sweet spots, while leaving other tasks to outsiders, or ad hoc coalitions of allies.

That's changing. This year, the Kochs' close allies are rolling out a new, more integrated approach to politics. That includes wading into Republican primaries for the first time to ensure their ideal candidates end up on the ticket, and also centralizing control of their network to limit headache-inducing freelancing by affiliated operatives.

The shift is best illustrated in the expansion of three pieces of the Koch political network expected to be showcased or represented at the three-day meeting in Palm Springs, whose evolving roles were described to POLITICO by several sources.

• Center for Shared Services: a nonprofit recruiter and administrative support team for other Koch-backed groups, which provides assistance with everything from scouting office space to accounting to furniture and security.


• Freedom Partners: a nonprofit hub that doled out $236 million in 2012 to an array of conservative nonprofits that is now expanding its own operation so that it can fulfill many of the functions of past grantees.


• Aegis Strategic: a political consulting firm started last year by Koch-allied operatives who will recruit, train and support candidates who espouse free-market philosophies like those beloved by the Kochs, and will also work with nonprofit groups in the Koch network, like Freedom Partners, with which it has a contract to provide policy analysis.

The Koch network raised an astounding $400 million in the run-up to 2012, spending much of it assailing President Barack Obama and congressional Democrats. After the Election Day letdown, the Kochs did an in-depth analysis to find out what went wrong and what they could do better. Among the areas identified for improvement were greater investments in grassroots organizing, better use of voter data and more effective appeals to young and Hispanic voters, according to sources.

Still, the big question was whether the donors who attend the conferences would keep stroking big checks or scale back their efforts. There's no way to measure that definitively, since most of the groups in the network don't disclose their finances regularly or reveal their donors. Early indications, though, suggest enthusiasm is high.

Groups in the Koch network - led by the brothers' main political vehicle Americans for Prosperity - spent $25 million between the summer and early this month on ads bashing Democrats over Obamacare, which have been credited for hurting Democratic senators who are vulnerable in 2014.

James Davis, an official at Freedom Partners told POLITICO that his group has expanded rapidly, "and we expect to continue to grow."

The 2014 potential of AfP, Freedom Partners and the other groups in the network depends in large part on the reception they get at this weekend's gathering - the annual winter installment in the Kochs' long-running series of twice-a-year meetings. Koch Industries spokesman Rob Tappan declined to comment on the Palm Springs meeting, but the company's website includes a statement describing the events as bringing together "some of America's greatest philanthropists and most successful business leaders" to "discuss solutions to our most pressing issues and strategies to promote policies that will help grow our economy, foster free enterprise and create American jobs."

Many of the right's most generous benefactors - folks like Minnesota media mogul Stan Hubbard, Wall Street investor Ken Langone and Wyoming mutual fund guru Foster Friess - are regulars. The gatherings, which attendees call "seminars" and are typically held at tony resorts, routinely attract some of the top operatives and biggest names in Republican politics, as well as rising stars tapped by the Kochs' operatives.

The last seminar, held in August outside Albuquerque, N.M., drew Rep. Paul Ryan, House Majority Leader Eric Cantor, New Mexico Gov. Susana Martinez and Iowa state legislator Joni Ernst, who is running in a crowded GOP Senate primary.

The seminars typically conclude with pledge sessions that can raise tens of millions of dollars. In 2012, that cash mostly went into a pair of non-profit conduits - Freedom Partners and the Center to Protect Patient Rights - whose operatives then doled it out to a range of nonprofits blessed by the Koch operation, including some groups asked to make presentations to donors at the seminars.

But several sources suggested that Freedom Partners' growth and expansion into a more central strategic role within the network means that the roles - and possibly funding - of the Center to Protect Patient Rights and other groups in the network will diminish. In other words, Freedom Partners will bring in-house many Koch network functions that had been outsourced. That could reduce the chances of a repeat of situations like that which the Center to Protect Patient Rights and one of its beneficiary nonprofits found themselves in California, where they paid $1 million last year to settle an investigation into alleged campaign finance violations. The settlement stipulated that the violation "was inadvertent, or at worst negligent," but the investigation brought unwanted attention to the Kochs, who repeatedly stressed that they had no involvement in the matter and distanced themselves from the operative who ran the Center to Protect Patient Rights, Sean Noble, explaining that he was just a consultant.

Freedom Partners, by contrast, is run by Marc Short, a former Koch employee, and staffed by other Koch loyalists, although Koch Industries issued a statement saying the group "operates independently of Koch Industries." The group, established in November 2011, is technically a business league, and its members pay at least $100,000 in annual dues. "Our membership has grown out of concern that the administration's policies are hurting Americans by crippling businesses and our economy," Davis said. The growth has continued since the 2012 election, he said, adding that the group is in the process of expanding its 50-employee staff.

It appears to be looking to hire a creative director to make videos for both Freedom Partners and other groups, as well as an executive to work with the groups' donors and help raise money for it and other groups. Those postings are listed on the website of the Center for Shared Services, which sources say is filling an innovative niche recruiting talent for the entire Koch network.

The network's ambitious plans are borne out in the Center's job board, which has an array of posts that hint at major 2014 expansions that seem to track areas of improvement identified in the Kochs' post-2012 analysis.

The website doesn't actually list the groups for which it's hiring, but sources say the Center — which was founded in mid-2011 and received $2.7 million from Freedom Partners in 2012 — is primarily devoted to boosting Koch-backed nonprofits. All the services it provides are "free or substantially below cost," according to the group's tax filings, which show it spent only $1.2 million through mid-2012. Center officials did not respond to requests for comment, but the group's job board reads like a guide to Koch World.

"The leading data and technology provider for the pro-free market public policy and advocacy community" is looking to hire about a dozen positions, including developers to "help build data driven web and mobile applications systems." The outfit is based in Alexandria, Va., where the Koch-backed voter data non-profit Themis and its for-profit arm i360 are headquartered.

A "youth advocacy organization" is seeking directors, volunteer coordinators and event coordinators in multiple states who have worked on national political campaigns, and have voter identification and turnout experience. The Koch network's youth advocacy nonprofit is called Generation Opportunity and it, like the organization in the postings and many Koch-backed non-profits, is based in the Washington suburb of Arlington, Va. An organization dedicated to Hispanic voter outreach - much like the Koch-backed LIBRE Initiative - is hiring field directors in Colorado, New Mexico and Texas.

Americans for Prosperity, The LIBRE Initiative and Generation Opportunity have focused their efforts primarily on beating up Democrats over Obamacare, but after 2013 conservative operatives had studied the Koch operation for signs that it might throw its weight into Republican primaries. AfP's president Tim Phillips had suggested that was a possibility for his group, which could have seriously altered the balance of power in the battle for the soul of the GOP. And, while POLITICO has learned that AfP ultimately decided against such a move, sources say that Aegis is envisioned as a way for Koch operatives to mix it up in primaries.

"They are the candidate-support operation of the Koch network," said one GOP operative who has met with Aegis president Jeff Crank about his firm's plans. "They're looking at these races and looking to get involved in primaries."

Crank, who ran twice unsuccessfully for congress in Colorado, was the director of that state's chapter of Americans for Prosperity, before serving a stint as the interim chief operating officer for the entire organization after a post-2012 election shakeup. Another Aegis staffer ran AfP's Nebraska chapter, while a third worked at Themis.

Crank didn't respond to phone calls or emails for this story, but last week on the Saturday morning radio show he hosts on a Colorado station, he said one of the reasons he started Aegis was "because we're trying to end that kind of nonsense from political consultants, who just go out and get a candidate so they can get a job." On his show a week earlier, he praised the Koch brothers, calling them "some of the most philanthropic givers in the United States of America" — citing their donations to medical research, the Smithsonian and various arts programs in New York. "But they're vilified if they give any money to try and keep America free."

Sources told POLITICO that Koch network donors invested in Aegis. Crank told the Denver Post that he had financial backers, though he didn't identify them, and said he also used his own money. He said his goal was avoiding GOP electoral meltdowns like Todd Akin, who won a Missouri Senate primary, only to implode in the general election campaign when he asserted that victims of "legitimate rape" very rarely get pregnant.

"Our effort is to find good candidates who are committed to pulling America off the fiscal cliff, whether they are gubernatorial candidates or U.S. House or U.S. Senate candidates," he told the Denver Post. Mother Jones reported that Crank has touted his ties to the Kochs and their fundraising network and that its first client is a New Hampshire state lawmaker who has been an AfP ally.

It's unclear if Aegis has signed any gubernatorial or congressional candidates yet, but POLITICO has learned that Aegis and i360 both made informal pitches to work for Ernst's Iowa Senate campaign around the time that she attended the August seminar in Albuquerque, for which her campaign reimbursed Koch Companies Public Sector $242 for "event registration fee," according to Federal Election Commission filings. They show the campaign also spent $884 on lodging at the Hyatt where the conference was held. Derek Flowers, an Ernst campaign staffer, told POLITICO that the payment to Koch was "to cover the cost of meals and expenses while at the retreat" which was paid for by the company, and said ultimately the campaign decided to go with firms other than Aegis and i360.

Ernst, though, said she was grateful for the chance to appear before the Koch network donors in Albuquerque, where she talked her campaign and why she thought she would be a good senator. "I do think it gets my name out there," she said last year, in previously unreported comments. "Not everyone will jump on board and support just because of that, but it is good to get the name out, absolutely."